Did Macron permanently divide the V4?

09.09.2017
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By
Serhii Yershov

Mr Macron’s visit to Central Europe, that took place in the Czech Republic, Romania, and Bulgaria is an explicit sign to Warsaw and Budapest that needs to be answered by making a choice. Since Macron chose to ignore Poland (which is the biggest and most economically advanced state in the region) and Hungary, these countries will need to make a final decision. Thus, the division line of V4 is between pro-euro approach and following the Western Europe, and a slower pace of European integration.

From the French perspective, it is important to bear in mind that Macron is a young president and it has a paramount importance for him to demonstrate that he can be a firm and tough president. Undoubtedly, he would not be able to use such rhetoric to any other foreign leaders outside the EU. However, it is possible for him to do it inside the EU. Moreover, he was very precise in his targets, specifically Poland and Hungary. These two countries are, in particular the main troublemakers for the Commission’s policies. Therefore, Macron did exactly what Germany cannot do due to its unfortunate past. Thus, from the pure cost-benefit perspective, it was beneficial for Macron to act in such way because it is important for him to win the hearts and minds of his domestic electorate and furthermore, ensure support of Western European leaders. On the other hand, he did not lose much with Poland and Hungary, since the relationships are already tense.

The cornerstone of the discussion with the V4 are the posted workers. For the newly elected president, the issue of unemployment plays a paramount role at home. Particularly because in France the unemployment rate is high – 9.6% in the first quarter of 2017 – the country is still the primary destination for temporary workers from other EU countries, who are ready to work for much lower salaries than French workers. Such workers come from Poland (16.9%), Portugal (16.1%), Spain (15.7%), Belgium (13.2%) and Germany (11.8%). This trend resulted in a rise of nationalist sentiments in France. Moreover, despite the fact that the cheap labour force comes from different parts of Europe, Eastern Europeans are often the object of anger.

In order to increase the French employment, Macron plans to simply reduce or eliminate the competition of cheap labour force from the East. Thus, according to Macron’s statement, the EU should establish universal salary and necessary rules. He is in favour of changing the Directive 96/71/EC, the Posted Workers Directive, which regulates the wages and permitted the length of stay for posted workers. Moreover, France also actively promoted an idea of reducing the duration of stay for posted workers from two years to one.

It is important to emphasise that Macron is not alone in his arguments. The governments of Germany, Austria, Belgium, the Netherlands, and Sweden joined France in sending a letter to the European Commission requiring to update the directive according to the principle of “equal pay for equal work in the same place”. Admittedly, Austria and Germany are also major destinations for a posted worker from Eastern Europe. Austria is one of the most persistent advocates for changing the EU directive, since it gets 58% of its posted workers from Eastern European countries. As a result, Austria’s unemployment rate increased simultaneously with its nationalism. Therefore, it is not a coincidence that Austria was the first country of Macron’s tour.

However, the fact that cannot be omitted is that the posted workers significantly help to boost Eastern Europe’s economic growth. In particular, Poland is the largest source of posted workers in Europe, each year sending more than 460,000 workers to other European states in Western Europe. Approximately 3% of all employed Polish people are working abroad, and all the money that they send back to Poland equals 1.4% of Poland’s GDP.

On the other hand, Latvia has only 1,400 workers posted around the EU, their remittances equal 4,6% to Latvia’s GDP. In comparison, Germany which is the second-largest sources of posted workers in Europe, only sends 240,000 employees to work in other countries in the EU, and their work resulted only in 0.4% of Germany’s GDP.

As a counterargument, Poland, Hungary, Slovakia, and the Czech Republic stated that they should have a possibility to compete with lower labour prices, just as the Western EU nations compete with the quality products and high-technology. The new EU members should be allowed to do this in order to catch up after the lengthy period of the communist regime.

Thus, the reason why Eastern European countries are in opposition to any changes to the directive on posted workers is quite explicit. Nonetheless, the International Monetary Fund estimated that if the drainage of work force continues at current rates, Central, Eastern and South-Eastern Europe will lose around 9 percent of their expected gross domestic product from 2015 to 2030. Hence, in a long run perspective, continuation of current politics and relying on the posted workers, for Central and Eastern European countries will eventually be highly expensive.

Nevertheless, even though there are certainly disagreements and misunderstanding in both parties, they pledged to renew dialogue. Moreover, the both sides admitted that Central and Eastern European low wages are a problem for all Europeans.

The European Council has agreed on the need to change the rules of compensation. The change of salary levels for workers sent abroad would be up to the host government and not to the country that sends the posted workers. However, before the change can be implemented, it must get approval from the European Commission and the European Parliament.

And this is precisely where a trick is hidden. If the European Commission rejects the amendments, the European Council could still pass them with a unanimous vote. However, the unanimity on that issue is unrealistic. Therefore, if the European Parliament modified the text and passed it back to the European Council, the council could approve the final version with a majority rather than with unanimity. Hence, the European Commission’s opinion would not be legally binding.

This is the scenario of less resistance that Macron hopes to achieve, because it is in the interest of France to get a resolution on the salary level and duration of time posted workers can legally work abroad. Therefore, France wants to see these rules set by the European Commission rather than by the EU member states. Therefore, if the limits are not systematic and uniform, it will create an environment where Western European countries consistently alter their rules to compete for the best posted workers.

As for the Eastern European countries, since they do not want to accept changes to the directive, a European Council’s proposal is the best option for them. For as long as Eastern European member states can establish their own rules, they will be able to defend themselves against Western European protectionism by conducting bilateral negotiations with the host countries on the terms and conditions for their workers. Undoubtedly, the Eastern European countries will not agree on a proposition in which Brussels dictates the price for their labour market. Some might argue that even a supranational institution like the European Commission, which enjoys the best technocracy, cannot possibly calculate the evolutions of labour demand and supply in every sector. However, some might also say that nowadays, it is evident that the European Commission has more expertise and capabilities than the national level.

Also, it is clear why Macron decided to divide the V4 by excluding Poland and Hungary from his agenda, as their governing right-wing parties have already stated their opposition to his proposals. Therefore, he is actively lobbying the French interest in the rest of V4 countries, where those interests are the most present. For that reason, he is seeking to convince Romania, the Czech Republic, Slovakia, and Bulgaria to support some of France’s proposals. Thus, the text of the revised directive would go back to the European Council.

In addition, this visit allows him to express support for French companies that are established in the region. Such countries as Romania, the Czech Republic, Slovakia, and Bulgaria host more than 72% of the French companies. In particular, Romania alone hosts 2,280 entities founded with French capital.

To sum up, it is plausible that Macron will achieve necessary support for him from Romania, the Czech Republic, Slovakia, and Bulgaria since their economies to a large extent depend on French business and investments. Also, the idea of a united Central Europe, formed by the creation in 1991 of the Visegrad Group, no longer exists. Mainly, when the countries of Central and Eastern Europe face the same challenges, they do not face them together. Moreover, the Czech Republic and Slovakia, are actively trying to separate themselves from Hungary and Poland, which are criticising the EU. Furthermore, even though Poland and Hungary share an animosity towards Brussels, they are completely polarised when it comes to dealing with Russia. Finally, Macron recently added another issue that will eventually only polarise the V4 even more.

Thus, it seems so far that Macron is successfully exploiting the old and well-known tactic of “divide and conquering”. Therefore, by dividing the V4 group, he put the Visegrad group countries in front of the dilemma between a future deeper European integration on French-German terms, or a future where Central and Eastern Europe is gradually sidelined. However, there is always a third way, where the V4 countries can meltdown their internal difference and work together on their common vision at the EU level. As a result, to start a dialogue seeking for a common European solution. For instance, so-called the Nordic League is a good example of cooperation that can serve well for the Visegrad group. Nevertheless, a fear of multi-speed Europe in the V4 is present and quite significant among the members, which in turn cause an increasing gap between them. Therefore, every crisis is not only a bunch of problems but also an opportunity for a leadership to solve it. Hence, Macron’s appearance on the V4’s agenda is a cornerstone that either will give an opportunity for the Visegrad group to stress its concerns of the future of the EU that should be taken into account or it will catalyse the division of the V4.

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